Part II of our book review of Frederick Sheehan’s Panderer to Power

Frederick Sheehan’s excellent 2010 book Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession provides us a window into the sources of the worst financial and economic crisis since the Great Depression.

In part I of this two-part review of Sheehan’s valuable book, we discussed Sheehan’s takeaways from Greenspan’s career before becoming Chairman of the Federal Reserve Board of Governors.

In turn, Sheehan’s review of Greenspan’s nearly twenty years with the Fed gets underway with the Senate confirmation hearing in 1987, after Greenspan’s nomination as Fed Chairman by President Ronald Reagan.  Sheehan notes with some approval the questioning of Senator William Proxmire of Wisconsin, then the chairman of the Senate Banking Committee.  Sheehan praises Proxmire’s willingness to critically examine Greenspan’s forecasting record and his apparent enthusiasm for serving the agenda of large banks.  Greenspan was a director of J.P. Morgan at the time of his appointment, which Proxmire noted along with Greenspan’s lobbying activity as a signal his expertise in banking issues might be more attentive to some interests than others. Read more È

Book Review — Frederick J. Sheehan’s Panderer to Power

Written on the heels of the worst financial and economic crisis since the Great Depression, Frederick Sheehan’s critical biography, Panderer to Power:  The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (2010) provides us with good lessons for the future.

Some perspective can be had from the fantasy classic Lord of the Rings.  Frodo, the hobbit, is on his quest to reach Mount Doom and destroy the Ring of Power.  Having made it substantially through his mission, but weighed by fatigue and fear for what lies ahead should he continue, Frodo asks Gandalf, a wise and powerful wizard, to take the Ring from him and complete the quest.  Gandalf says “No.�

“With that power I would have power too great and terrible. And over me the Ring would gain a power still greater and more deadly. … Do not tempt me! … Yet the way of the Ring to my heart is by pity, pity for weakness and the desire of strength to do good.�

Well, why did Alan Greenspan take the Ring?  Did he just take it when offered, or did he pursue it?  Greenspan certainly ended up in a powerful position, as Chairman of the Board of Governors of the Federal Reserve System – heading our nation’s central bank.  The Fed conducts monetary policy, regulates and supervises banks, serves as a ‘lender of last resort,’ and provides critical payment services for the financial system.  These responsibilities are, well, significant.  Consider monetary policy, where we have a law directing a committee of 12 people at the Fed to control the aggregate amount of money and credit used by over 300 million other people.

Coming on the heels of the worst financial and economic crisis since the Great Depression, Panderer to Power provides a valuable, critical biography.  Alan Greenspan led an institution that advertised its ability to stabilize the financial system – both before and after our recent financial meltdown.  Biography is a form of history, and as Santayana said, “Those who cannot remember the past are doomed to repeat it.â€�  In light of recent years, Sheehan’s biography helps us understand and remember the past, and underscores critical things to watch for in the future. Read more È